IRI Issues Second-Quarter 2018 Annuity Sales Report

The Insured Retirement Institute (IRI) today announced final second-quarter sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc. Industry-wide annuity sales in the second quarter of 2018 totaled $56.0 billion, a 15.9 percent increase from sales of $48.3 billion during the first quarter of 2018, and a 12.3 percent increase over sales of $49.9 billion in the second quarter of 2017. On a year-to-date basis, total annuity sales were $104.3 billion, a 5.8 percent increase of 2017 Q2 year-to-date sales of $98.6 billion.

According to Beacon Research, fixed annuity sales during the second quarter of 2018 rose to $31.9 billion, a 25.4 percent increase over sales of $25.4 billion during the first quarter of 2018 and a 21.8 percent increase over sales of $26.2 billion during the second quarter of 2017. Variable annuity total sales were $24.1 billion in the second quarter of 2018, according to Morningstar. This was a 5.2 percent increase from sales of $22.9 billion in the prior quarter and a 1.8 percent increase over sales of $23.7 billion in the second quarter of 2017.

"IRI has remained confident that annuities sales would rebound due to pent up demand for these solutions, which can provide both guaranteed lifetime income and principal protection to retirees and those saving for retirement," said IRI President and CEO Cathy Weatherford, "and we strongly believe sales will continue to rise as Americans take on every more responsibility for their own retirement security, and as demographic trends inexorably increase the number of Americans living in retirement."

According to Beacon Research, fixed annuity sales strongly increased across all product types, with fixed indexed increasing sales by more than $3.0 billion in the second quarter and book value annuities rising over $2.0 billion, as compared to the first quarter of 2018. Fixed indexed annuity sales rose 20.8 percent to $17.7 billion from $14.6 billion in the first quarter of 2018, and 22.9 percent from second quarter 2017 sales of $14.4 billion. Book value and market value adjusted (MVA) annuities, combined sales of which were $11.3 billion, rose 35.7 percent relative to first quarter sales of $8.4 billion, and were also up 25.6 percent versus second quarter 2017 sales of $9.0 billion. Income annuity sales also rose, posting sales of $2.9 billion, an 18.1 percent increase over first quarter income annuity sales of $2.5 billion. For the entire fixed annuity market, there were approximately $17.7 billion in qualified sales and $14.2 billion in non-qualified sales during the second quarter of 2018.

"The fixed annuity market saw record percentage increases across the board in the second quarter," said Beacon Research CEO Jeremy Alexander, "reflecting strong demand among advisors and consumers for safety and guaranteed income."

According to Morningstar, variable annuity net assets rose 0.7 percent to $1.97 trillion during the second quarter of 2018. On a year-over-year basis, assets fell 0.9 percent, from $1.99 trillion at the end of the second quarter of 2017, as increasingly negative net flows overcame positive market performance. Net flow in variable annuities were -$21.1 billion in the second quarter, up 14.6 percent from -$18.4 billion in the first quarter of 2018. Within the variable annuity market, there were $15.5 billion in qualified sales and $8.6 billion in non-qualified sales during the second quarter of 2018. Qualified sales rose 7.0 percent from first quarter sales of $14.5 billion, while sales of non-qualified variable annuities rose 2.2 percent from first quarter sales of $8.4 billion.

"While negative net flows continue to weigh on total net assets," said Michael Manetta, Senior Quantitative Analyst at Morningstar, "it is encouraging to see a solid rebound in overall sales of variable annuities, indicating that distributors are normalizing operations in the wake of the DOL fiduciary rule being vacated."

*. Total Premium Sales, also called Total Premium Flows, represents the sum of new sales [all first-time buyers of a contract, including inter- and intra-company exchanges] and additional premiums from existing contract owners. Net Sales, also called Net Flows, represents Total Premium Sales minus surrenders, withdrawals, inter- and intra-company exchanges, and benefit payments.

**. Morningstar estimates net sales based on a calculation methodology used across all investment universes for which Morningstar collects and publishes asset and performance data, including global open end mutual funds, separate accounts, and exchange traded funds.